Stuti Ceramic Pvt. Ltd. (SCPL) manufactures crockery items which are predominantly used only by the domestic household customers. Now the company…

Whether Stuti Ceramic Pvt Ltd (SCPL) can raise funds through Private Placement? Yes, SCPL can raise funds through the private placement of shares. Section 23 (2) (b) of the Companies Act, 2013 (the Act) provides that a private company may issue securities through private placement by complying with the provisions specified in section 42 of the Act in supplement with those stated under Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. Meaning of Private Placement According to the Explanation I to section 42 (3) of the Act, "private placement" means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer- cum-application, which satisfies the conditions specified in this section. Offer to be made only to a select group of persons A private placement shall be made only to a select group of not more than two hundred (200) persons (referred to as “identified persons") in a financial year who have been identified by the Board after passing a special resolution [Section 42 (2) read with Rule 14 (1) of the Companies (Prospectus and Allotment of Securities), Rules 2014]. Limit on Fresh Offer As per section 42 (5) of the Act, no fresh offer or invitation under this section shall be made unless the allotments with respect to any offer or invitation made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the company. Thus, Stuti Ceramic Pvt. Ltd. can raise further funds through private placement issue after the allotments with respect to right issue for 100lakh have been completed and subject to the maximum number of 200 persons (identified persons) under section 42 (2) and by complying with the procedures stated in Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. Time Limit for Allotment of Securities As per section 42 (6) of the Companies Act, 2013, a company making an offer or invitation under this section shall allot its securities within 60 days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within 15 days from the expiry of 60 days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of 12% per annum from the expiry of the sixtieth day.